Kraft Heinz sales rise in third quarter, but not very much

The FINANCIAL -- The Kraft Heinz Company on November 1 reported third quarter 2017 financial results that reflected significant cost savings and improved net sales performance that were offset by a higher tax rate versus the prior year period.

“We continued to build top- and bottom-line momentum from operations during the third quarter, and expect to see the same in the fourth quarter,” said Kraft Heinz CEO Bernardo Hees. “There’s no question that the retail environment, particularly in the United States, will remain both dynamic and challenging. However, the investments we’ve been making in our brands, our innovation pipeline, our people and our capabilities make us well-positioned to continue delivering sustainable, profitable growth in both the near and long term.”

Q3 2017 Financial Summary

Net sales were $6.3 billion, up 0.7 percent versus the year-ago period, including a 0.4 percentage point benefit from currency. Organic Net Sales increased 0.3 percent versus the year-ago period. Pricing increased 0.5 percentage points, driven by pricing to offset local input costs in Rest of World markets and higher pricing in the United States that more than offset increased promotional activity versus the prior year period in Canada and Europe. Volume/mix decreased 0.2 percentage points, as growth in condiments and sauces globally was offset by overall shipments in the United States.

Net income attributable to common shareholders increased to $0.9 billion and diluted EPS increased to $0.77, reflecting gains from lower Integration Program and restructuring costs, higher net sales and favorable foreign currency that were partially offset by a higher effective tax rate. Adjusted EBITDA increased 7.0 percent versus the year-ago period to $1.9 billion, primarily driven by gains from cost savings initiatives(2), lower overhead costs and favorable pricing that were partly offset by higher input costs. Adjusted EPS of $0.83 was in line with the year-ago period, mainly reflecting growth in Adjusted EBITDA that was offset by a higher tax rate versus the prior year period, according to the Kraft Heinz Company.

Q3 2017 Business Segment Highlights

United States

United States net sales were $4.4 billion, down 0.4 percent versus the year-ago period. Pricing increased 0.4 percentage points, primarily reflecting higher prices in cheese and desserts that were partially offset by the timing of promotional activity versus the prior year period in a number of categories. Volume/mix decreased 0.8 percentage points, primarily due to select distribution losses in nuts and cheese as well as lower shipments in meat and coffee. This was partially offset by consumption-led growth in Lunchables and P3, as well as gains in foodservice.

United States Segment Adjusted EBITDA increased 6.8 percent versus the year-ago period to $1.4 billion, driven by gains from cost savings initiatives, lower overhead costs and favorable pricing that were partially offset by unfavorable key commodity(3) costs, particularly in meats and cheese.